Low office vacancy rate puts economy in positive light

By Don Shilling

Cleveland’s office vacancy rate more than doubles the Mahoning Valley’s, according to the report.

Office vacancy rates in Northeast Ohio are running close to the nation’s average, another sign that the region’s economy is not as bad as some think, an economic development group said.

“People might guess that we have a large overhang in office space, but that’s not true,” said Tom Waltermire, chief of Team NEO, a 16-county economic development group.

Team NEO today released its quarterly economic update for the region and highlighted office real estate.

The office vacancy rate in Northeast Ohio is 12.1 percent, compared with 11.5 percent nationwide.

By comparison, the Phoenix, Las Vegas, Dallas and Detroit markets all have vacancy rates of more than 15 percent.

Northeast Ohio’s vacancy rate is about the same as it was in 2003. It rose to about 14 percent in 2004 and 2005 before declining.

Of the metropolitan areas within Northeast Ohio, the Mahoning Valley has the lowest vacancy rate at 6 percent.

Waltermire cautioned, however, that data for the Youngstown-Warren area may need to be revised going forward.

The rate is compiled by CoStar Group, which gathers real estate data all over the country, but the company only began working in the Mahoning Valley a year ago. Waltermire said vacancy rates can fluctuate for a while after CoStar enters a market.

Scott Lewis, vice president of the real estate company Edward J. Lewis, said the local market did well in attracting professional and medical offices from 2005 to 2007, though the market slowed somewhat this year. The real estate company has offices in Youngstown and Warren.

Lewis said large buildings in both downtowns attracted a number of new tenants in the previous three years. Medical offices have been expanding in the suburbs, he said.

Buildings that had deteriorated inside, such as the Realty Building in Youngstown, normally aren’t included in vacancy rates because they are uninhabitable, he said. The Realty Building is being remodeled into an apartment building.

CoStar listed a vacancy rate of 8 percent for Canton-Massillon. Akron has a vacancy rate of just over 8 percent, while Cleveland’s rate is nearly 14 percent.

Team NEO’s report said the region has 18.7 million square feet of occupied Class A space, which is 7 percent higher than in 2003. Class A is the highest-grade office space.

Waltermire said the expansion of office space in the region appears to be continuing. Eaton Corp. is planning a new headquarters in the Cleveland area, and there is talk of new office construction at Public Square in downtown Cleveland.

Waltermire said the level of demand for office space is consistent with an economy that is growing slowly but steadily. In July, Team NEO highlighted statistics that showed the demand for industrial space in the region was growing.

Team NEO also provides a quarterly update on the region’s gross product, which is the value of all goods and services produced. No new figures were available since July, however. Previous reports show an annual growth rate of about 1 percent.

shilling@vindy.com